RBI Governor Urjit Patel had recently said that the RBI doesn’t have adequate powers to deal with public sector banks.
The RBI has decided to put in place a system for daily reporting of individual transactions by banks.
The Reserve Bank of India on Thursday kept rates unchanged at 6 per cent. The six-member Monetary Policy Committee, following a meeting today, noted that growth has been recovering and output gap is closing.
The Monetary Policy Committee, headed by RBI Governor Urjit Patel started its 2-day meeting on Wednesday. The policy is likely to keep key repo rates unchanged.
The Reserve Bank of India is expected to keep interest rates on hold on Thursday for the fourth straight meeting but maintain a cautious tone despite a sharper-than-expected pullback in inflation in the last few months.
The six-member Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, is to meet on April 4 and 5. Pressure has been mounting on the Reserve Bank of India (RBI) to cut interest rates in the wake of declining retail inflation and the need to fuel growth momentum.
CEA Arvind Subramanian’s statement comes days after RBI Governor Urjit Patel pointed at the central bank’s helplessness in dealing with public sector banks due to constraints of inadequate legal powers to supervise and manage them.
Patel said that under the Banking Regulation Act, supercession of the boards of PSBs is not allowed as they are banking companies under the Companies Act. Similarly, the RBI cannot remove the chairman and managing director, and cannot force a merger in the case of PSU banks.
Unveiling the bi-monthly monetary policy statement in Mumbai, RBI Governor Urjit Patel said “significant and postponed deviations” from fiscal targets would make matters “more challenging” going forward.
There are several risks to the projected inflation trajectory, says RBI Governor Urjit Patel.
According to Patel, this is to ensure that the money is utilised to strengthen public sector bank balance sheet and “not to sow the seeds for the next boom and bust cycle” of lending.
In October, government had announced a Rs 2.11-trillion capital infusion into the NPA-hit public sector banks over the next two years.
Here is a modest proposal to bring about much-needed accountability to the decisions of the RBI (and MPC): Let the RBI governor be questioned by Parliament twice a year
The panel reviewed the major global, domestic developments which could impinge on India’s financial stability.
Of the total of 22 PSU banks, as many as eight currently have gross non-performing assets (GNPA) above 15 per cent while 14 banks have GNPA of more than 12 per cent.